Tag Archives: ohio department of taxation

Protect yourself from Tax Refund Fraud

Tax refund fraud has become a growing concern for taxpayers, state and local governments, and the federal government. Tax departments are implementing strategies to prevent and detect for the 2015 tax season.

The Ohio Department of Taxation (ODT) is implementing additional safeguards this tax season that will delay state tax refunds. The ODT is anticipating an increase in identity theft directly affecting tax fraud.

tax-fraudLast year, ODT stopped an unprecedented number of fraudulent income tax returns seeking to steal refunds totaling more than $250 million. In previous years, attempted tax fraud averaged roughly $10 million.

In order for the ODT to detect refund fraud due to identity theft, an additional up-front filter will now be applied to all tax refund requests to examine the demographic information reported on a return. This examination will then assign a “probability of fraud” factor that will determine how the return is then further processed by ODT.

If a return is pulled for review, ODT’s additional security measures will require some taxpayers to successfully complete an Identification Confirmation Quiz before the return will continue to be processed. If a taxpayer’s return is selected for identity confirmation they will receive a letter from ODT directing them to http://www.tax.ohio.gov. This will provide access to the quiz and detailed instructions on how to complete it. Taxpayers without access to the Internet will be directed to call ODT at 1-855-855-7579.

Processing of returns for refunds will be delayed due to these additional screening and security measures. According to the ODT, electronic returns requesting a refund may take up to 15 days to be direct deposited and paper returns could take up to 30 days for a physical check to be mailed out.

Not only is the ODT taking aggressive action on identity theft and tax fraud but so is the Internal Revenue Service (IRS). For 2015, the IRS is introducing new procedures which will address some of the issues. Effective 2015 tax season, the IRS is limiting the number of refunds directly deposited into a single financial account or onto a prepaid debit card. Therefore, any of the subsequent refunds will be issued by paper check and mailed to the taxpayer. Exceptions will not be made.
Visit the Taxpayer’s Guide to Identity Theft for helpful tips to protect yourself from identity theft or fraud.

By: Aubrey Forche, Staff Accountant


New Tiered Structure for Ohio Commercial Activities Tax

Image 1

The new tiered structure could mean more annual minimum tax due in May. Note that the CAT rate of 0.26% remains unchanged and continues to apply to those taxpayer’s with taxable gross receipts over $1 million (the first $1 million in taxable gross receipts are excluded from the calculation of a taxpayer’s CAT liability.)

All CAT taxpayers pay an annual minimum tax which is due with calendar year taxpayers’ annual returns or with the quarterly taxpayers’ first quarter returns, due May 10th of each year. For 2013, the annual minimum tax was $150. For tax periods beginning on January 1, 2014 and thereafter, the annual tax will be a tiered structure. The taxpayer will utilize its previous calendar year’s taxable gross receipts to determine the current year’s annual minimum tax. Those taxpayers with $1 million or less in taxable gross receipts will still pay $150 annual minimum tax (no change). The annual minimum tax for taxpayers with total taxable gross receipts of more than $1 million but less than or equal to $2 million will be $800; for taxpayers with taxable gross receipts more than $2 million but less than or equal to $4 million will be $2,100; and for taxpayers with taxable gross receipts in excess of $4 million will be $2,600.

Please refer to the chart below provided by the Ohio Department of Taxation:

Image 1

Example: XYZ Corp. (XYZ) is a quarterly taxpayer. XYZ reports cumulative taxable gross receipts of $2.5 million for the reporting period of January 1, 2013 to December 31, 2013 (all four quarters of 2013). When XYZ files its first quarter 2014 return in May, 2014, the annual minimum tax associated with XYZ for 2014 will be $2,100. Assume that on its first quarter 2014 return, XYZ reports taxable gross receipts of $1,200,000 for the first quarter of 2014. XYZ’s total tax due with that return is $2,620, which includes the $2,100 annual minimum tax, plus $520 CAT (0.26% x ($1,200,000 – $1,000,000 Exclusion).

By: Jenny Furey, CPA

Sales & Use Tax: Applying The Tax

Many businesses have trepidation in applying Ohio sales and/or use tax to services provided in the course of daily activities.  The State of Ohio does offer a list of services which are subject to sales and/or use tax.  These services include the following:

  • Installation
  • Repair
  • Employment (temporary labor)
  • Lawn care and landscaping
  • Exterminating
  • Automatic data processing
  • Snow removal
  • Janitorial and maintenance
  • Storage
  • Maintenance contracts
  • Employment placement
  • Motor vehicle towing

The aforementioned services subject to tax are listed in “Table 2” of the general guidance offered by the Ohio Department of Taxation.

Ohio also offers a list of services that are generally not taxable.  These services include the following:

  • Professional
  • Personal
  • Insurance

These lists are not all inclusive (meaning that there are other services subject to tax), however, it does offer a starting point for determining which services are subject to tax.  Your business is unique and its activities will often lend itself to specific instances where services which appear subject to tax are not (due to a specific exemption) and services appearing exempt or non-taxable are subject to tax (due to a specific provision).  A Hair Salon provides an excellent example of services subject to and not subject to taxation:

Hair Salon Services Subject to sales taxation –

  • Application of Cosmetics
  • Manicures
  • Pedicures
  • Hair Removal
  • Massage

Hair Salon Services NOT Subject to sales taxation –

  • Hair Cutting
  • Hair Coloring
  • Hair Styling

As illustrated, it is not always cut and dry (no pun intended) what services are subject to sales and/or use tax.  Please contact your William Vaughan Company representative to determine the services that subject your business to sales and/or use taxation.

By: Nate Bernath, CPA

Ohio Tax Amnesty Program Kicks Off Tomorrow

The Ohio Department of Taxation will allow Ohioans several weeks to get current on their obligations while avoiding penalties and some interest charges.

The general amnesty program, created in the biennial budget, will run May 1 through June 15 this year and applies to several taxes, with a notable exception of the consumer’s use tax, which is the subject of a standalone amnesty program.

Tax Commissioner Joe Testa said the state expects to bring in $36 million, plus $4.2 million for local jurisdictions whose taxes are covered under the amnesty, such as school district income tax. A similar amnesty program offered in 2006 brought in nearly $60 million, according to the department.

Any person with outstanding taxes due as of May 1 is eligible, no matter how far back the liability stretches, unless the department has already initiated an audit or issued an assessment for the amount due. Those opting for amnesty will have penalties forgiven and pay only half the owed interest, which Testa said is levied at 3% plus the federal short-term rate.

Eligible taxes include the following:

  • Individual income
  • Individual school district income
  • Commercial Activity
  • Sales and seller’s use
  • Employer withholding
  • School district employer withholding
  • Corporation franchise
  • Pass-through entity
  • Estate
  • Gross receipts of a natural gas company or combined electric and gas company
  • Motor fuel
  • Cigarette or tobacco products
  • Dealers in intangibles

Tax Commissioner Joe Testa said increasingly sophisticated software is making it easier for the department to find those with outstanding taxes or identify areas where there likely are unpaid taxes.

Testa said the department decided to pursue a separate amnesty program for consumer’s use tax because audits in recent years have shown it to be the least understood tax. He said the previous administration had already been planning a public awareness campaign to address the problem, and the Kasich administration decided to redesign, extend it and pair it with an amnesty program.  “The feeling was it deserved special attention and a longer period of time and more forgiveness,” he said.

Call William Vaughan Company with your questions about the general or use tax amnesty programs.

 By: Sharon Trabbic, COO

Where is My Tax Refund?

Tax season is officially over return should be filed or extended at this point. Many people were forced to write a check to Uncle Sam with their filing or extension, but some are expecting a nice little check from the government. So when should you expect this pleasant little influx of cash? How do you know if your return is being processed? Even though we have touched on this topic in previous blogs, we deemed this to be the most relevant topic following tax season.

According to the Internal Revenue Service’s website, if you e-filed your tax return, you can look forward to receiving your refund within 10-21 days. Sure, that sounds great, but what if you want a better idea? The website also has an app called “Where’s My Refund?” which 72 hours after your return has been accepted for e-filing, you can enter in selected information to get a more accurate prediction of when said check will be mailed or when the refund should be released for direct deposit. Before pulling up the website, make sure you have the following information available:

  • Social Security Number of Taxpayer
  • Filing Status
  • Exact Refund number from your return

If everything is processed within their system, you should have a close estimate of when you can have that extra money in your pocket.

The Ohio website also has a version of “Where’s My Refund?” in which you can enter the following information:

  • Social Security Number of Taxpayer
  • Taxpayer’s Birth date
  • Type of Tax (in most cases- select income)

Other states that have an income tax also have a similar websites if that would apply to you, so be sure to do a search.

Within a couple minutes, you can quickly have the knowledge of when you can have that extra spending or investing money burning a hole in your pocket!

By: Jill Blakeman, CPA